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Case Law on Service Charges for the cost of Utilities

This section of our Case Law Library looks at cases related to:

  • The circumstances under which a Landlord may recharge electric, gas and water costs as s Service Charge
  • Whether the amount of a Service Charge for costs related to the provision of electric, gas and water is reasonable

Reasonableness of the amount charged:

Wallace-Jarvis v (1) Optima (Cambridge) Ltd (2) Khazai [2013] UKUT 328 (LC)

The Upper Tribunal in this case decided that a Landlord was required to prove that the water element of their Service Charge bill was reasonable once the Leaseholder had demonstrated that the bill was based on a rate of water consumption much higher than is normal for a household of her size. The Landlord was unable to provide any such proof, and the Upper Tribunal recalculated the water element of the Service Charge based on a information from the Consumer Council for Water and a formula given in the Water Retail Order 2006.

VAT on Electricity and the Climate Change Levy:

MacGregor v BM Samuels Finance Group Plc [2013] UKUT 471 (LC)

Decision by the Upper Tribunal that a landlord was only entitled to recharge VAT on electricity at the lower rate of 5% through the service charge, even if the landlord paid VAT on the electricity at a higher rate. The UT also concluded that therefore the landlord also could not pass on the cost of the Climate Change Levy through the service charge.